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127: Go From Idea to Finished Physical Product with Filip Valica

Filip Valica from The Product Startup is a mechanical engineer who runs a podcast where he interviews small business owners and Shark Tank winners about Do It Yourself product development. He discusses the path you need to take to go from an idea for a physical product, to selling it in a marketplace. (Test your idea quickly, make a prototype, validate the market, iterate, etc.) He also touches on different ways to make money with physical products, from Amazon FBA, to selling on your own website, tweaking existing products from suppliers, and even licensing.

[showhide type="transcript" more_text="Display Transcript" less_text="Hide Transcript"]Robert Plank: Filip Valica is the founder of The Product Startup, a site that provides a step by step blueprint to aspiring product creators wanting to bring their ideas market. Through interviews with successful small business owners, inventors and Shark Tank winners, he explores the intersection of his interest and experience, which is Do It Yourself product development. Filip, glad to have you on the show today.

Filip Valica: Awesome. Thanks for having me on the show, Robert.

Robert Plank: Cool, so in addition to what we just talked about, what is it exactly that you do?

Filip Valica: By day I'm a mechanical engineer and an engineering manager. I work for companies to help take their products to market. Then at night I turn into a superhero you've never heard of to help other people kind of do the same with their own personal ideas.

Robert Plank: Cool, so like with who and with what?

Filip Valica: In my day job I work with, most of the companies I work with are in oil and gas, and some are in utilities and emergency vehicles. When I first got out of school, I worked for IBM and then I worked for a really tiny company. I went from working with like a 300,000 person company to like a mom and pap with 20 people. That 20 person company developed these products for, they basically connected the engine of an emergency vehicle and create a ton of electrical power to power like the Jaws of Life or other types of tools that a firefighter might use to get you out of a car.

Robert Plank: That's cool. You take your mechanical engineering knowledge and someone has an idea, and you help them get it out there, get it patented, all that good stuff?

Filip Valica: In a way. I'm doing it on my website and I'm not working with individuals right now. It's just a site where I put a bunch of information. It was a labor of love, so you could say. Our daughter was born about 16 months ago and the day that she was born I realized that you know what? If I don't get off my rear end and follow my passion and do something, then I'm going to wake up one day and she'll be in college and I'll be regretful. That day I basically started working on creating a bunch of content for a site and I launched the site in January of this year. Then I created a podcast in March, where I interview people that have been able to turn their ideas into products themselves. Yeah, the rest is history, so to speak. It's really just a information based site and a place where you can go to find how to take the next step if that's what you're looking to do.

Robert Plank: Well, cool. Let's talk a little bit about that. As far as the site that you created and the content that you've created yourself plus the guests you have on, what's the most interesting, I guess, topic or case study that comes to mind right now?

Filip Valica: Yeah, so I think most people will write in and say, "Hey, I have this really cool idea and I don't know how to take it to market" or, "What's the next step that I need to take? I've got a sketch of something and maybe I need to go and patent it, but what do I do?" To them it's probably the same thing that you guys have talked about in your other episodes. It's you really want to test your idea as quickly as you can, creating a concept prototype and validating the market, validating the customers. There's a process of all of this on the site for free, for anyone to go up there and look, and then iterate, so you've got a bunch of ideas you do that to all your ideas and the ones with the most promise will float to the top.

Robert Plank: Is that something that you commonly recommend someone to do, to have multiple ideas going just all pushed up to that finish line or whatever? I guess that way they don't have all their eggs in one basket?

Filip Valica: In way. If we look at the process, so what I did ... I'm going to take one step back really quick so I can explain myself. When I worked for small companies and really big companies and corporations, I noticed that they were kind of taking the same path to market. Even though they used different names and they had different tools and different processes, they pretty much followed the same steps and so all this site is a place where you can find out what those steps are and what's typically done during that step. I go into some detail about how you can do that step yourself if you want and then you can also decide if you want to hire somebody. There's some links there, again, no affiliation to any of these companies, where you can get more information. Basically it's a roadmap.

You asked about is it better to have a whole lot of ideas so you don't have all your eggs in one basket? I think when you first start the process, you might have more than one idea and some people have tons of ideas. Others have problems coming up with maybe even one. You need to be able to taper it down so you're not spending all your time in five or 10, 15 directions. The way that companies do this is this systematic process where they add a little bit of value, a little bit of work and then reevaluate it. It's like a guess and check type method. It's interactive. Every couple of steps you're either validating something, you're validating the market, you're validating your customers or you're validating the product. That way you're not going off on a tangent by yourself and then all of a sudden you wake up and no one is there with you, your product has no audience.

Robert Plank: Oh, yeah. If you just created A in a vacuum and then, "No one understands me."

Filip Valica: Right, right.

Robert Plank: You mentioned a little bit there like there are steps. Are there a lot of steps or is it something that you're able to list out for us real quick here?

Filip Valica: Yes and yes. There are a lot of steps. There's about 14 steps, only because I believe in breaking things down into small bite-size pieces. It's kind of that age-old question, "How do you eat an elephant? One bite at a time."

Robert Plank: One bite at a time, yep.

Filip Valica: I'm not a fan of just people saying, "Hey, there's these only three steps to getting a product to market. All you have to do is design it, make it and sell it." I just gave you zero information, right?

Robert Plank: Right.

Filip Valica: Yeah. I don't want to necessarily bore the listeners here by listing out all 14 steps, but basically you go from getting the idea to creating prototypes to designing, to designing for manufacture, funding it, making it, marketing, selling and shipping. There's some intermediate steps there depending on if you want to get patents and how complicated the design is, but it's very logical, step by step so you know, when you ready it, "Hey, this is what step I'm on and this is what maybe I haven't done that I need to go back and do."

Robert Plank: Okay. That's cool, yeah. You know where you are at right now and what's the next step for you, or if you need to go back and go fix something.

Filip Valica: Yeah, absolutely.

Robert Plank: Have you gone through this process not just with working with other companies, but have you gone through this process for your own idea?

Filip Valica: Yes. I've got a couple of ideas that I'm working on now. Had some more time lately, where I've been able to invest them working on a side project and some products and so I'm testing it by going through that. Most of the small companies that I've worked for have followed this procedure, I guess, these types of steps, again, by different names. It's not anything that's necessarily new. People that read the blueprint or these processes should be able to pick up what it is just by looking at it. Now, of course, once you start diving into the detail, some of these steps can take a couple of days or a week, and some can take months to complete.

Robert Plank: Okay. You're in fact actually making a product that ... What's the goal with this product? What are you building towards?

Filip Valica: Yeah, so the goal for me is to create multiple products so I can have multiple revenue streams from the product themselves. Basically, many companies, if you will. A couple of products would be part of one company and maybe some others under another, so small brands that have something in common. For example, I have a furniture product that just launched on Amazon that I didn't really design or create myself. I just private labeled. I don't know if you know much about private labeling.

Robert Plank: A little bit. Like, go on Alibaba, go contact them, buy the minimum order, that kind of thing.

Filip Valica: Yeah, so something like that, except I tweak the design a bit and I took it a step further. I bought an entire 20 foot container of product that I had custom designed or tweaked, I should say, for what I was looking for. Then I shipped it to Amazon. That main goal of that was just to test the process of contacting a manufacturer and then having Amazon fulfill it because those are the parts of the process that were most foreign to me again, because most of the work that I've done was working in the US with small companies that have manufacturing based in the US. I've definitely done the cradle to grave here. I just didn't know how it fit into the Amazon model.

Robert Plank: That's pretty cool that you were able to tweak something because the only two avenues I'd heard about were, like you said, the private label where you just go in and find something that's already made or that other process, which it seems like it might take a while, for someone to design something, especially if patenting is involved. It seems like what you did there with the first part, that was a little bit of a shortcut there, right? You had an idea of what you wanted to make, but then instead of having to go one extreme or the other, you just got the parts and assembled it, I guess. Is that right?

Filip Valica: No, absolutely. That's the nice thing about this DIY product development blueprint that I throw up there, is that you can, if you feel that all of the other previous steps have been done for you, for example, a private labeled product that already has a market, that's been tested, you get to skip all those steps until you hit the part where you're designing for a manufacturer or whatever you need to go next. It's kind of flexible in that. I want to touch on another thing that you said, where I was able to tweak the design. In my opinion, you could do that with most products. I think you can back to the manufacturer and say, "Hey, listen. This is what I would like to change with it." Now, whether they'd come back to you with a number that you agree with is a different story, but there's always room for that change. You just need to have that conversation with them and see what the minimum upfront cost is in that type of thing.

Robert Plank: That's kind of interesting. That's a whole another world I didn't even know about. You mentioned on your site and then a few places that part of what you do, you can do at least with teaching people what to do this. You can teach people how to get on the TV show Shark Tank. Is that right?

Filip Valica: Yeah. I loosely say that just because a lot of the people that I have on my podcast have been previous Shark Tank winners and the process that they take to get there is similar to if you were launching your own product. Instead of looking for funding from friends and family, now you're looking for funding from the Sharks, so ...

The only thing I was going to say for that is the Sharks probably have the same or similar requirements to making sure that you're a product the ideas are vetted and that you validated your customers' needs and you've done some upfront design and maybe you've even pre-sold some orders or made some sales. They have those types of requirements just like maybe any other investor that you'd run into.

Robert Plank: In order for someone to, for example, get on a show like that, what would they have to do?

Filip Valica: Yeah, so I think Shark Tank is special just because it's also on TV so there's the added component. A lot of the people that you speak with that have been on the show will say that first few rounds, there's three last I talked to somebody, the first two or three rounds are based on your likability. The ability for other people to pick up the phone and call for you or to switch the channel on and watch you, your ability to connect to other people in the audience. It's a TV show, so it's a ratings game, right?

Robert Plank: Right.

Filip Valica: The other part of the equation is what happens when you get through that third round and now the producers signed off on your likability and you're sitting in front of the Sharks. Now you need to have a viable product/business. I say businesses because lately or many of the products that have been founded have been around existing businesses, have the capability to grow. Many of them, and again I hate to use generalities because there's definitely some products that don't follow this mold, many of the products aren't just one-hit wonders. They have the ability to create other product lines instead of just variations. In other words, it's not just a different size or color or a copy of that product that does something just slightly different. It's a whole another avenue or it's a line of type of product. It needs to be developed and they need to be able to see that it has legs. Usually what that means is that you've got money or revenue coming in.

Robert Plank: Okay, so they're looking for some very specific things there?

Filip Valica: As far as I can understand, it's really hard to say what idea will succeed or fail just based on looking at it because they definitely have their own numbers involved and you've got every Sharks' personal preference. They take certain types of products. I don't watch the show religiously, so I don't want to get caught in a lie here, but a lot of the people that I've had on that were successfully able to take money from the Sharks and partner with them were people that knew what they were doing, they understood their market. They had a really good product with an idea that just needed to be amplified, that you need to turn up the dial a little bit. That it's not necessarily a product or an idea that you need someone else to put in a ton of work to validate or to make, to become real. If you didn't listen to anything that I've said the entire episode, I will say that there's very few people that will give you money for an idea.

Robert Plank: That's huge right there. What you're saying is for someone to be on Shark Tank, for example, then aside from all the other things that there's been a certain amount of market research, a certain amount of likability, what you're saying is that if that was someone's goal or if they were looking for the right fit, then that would only be if they were just at the point where they're ready for more money, but most of the work is already done by the time they're on that show. Is that right?

Filip Valica: Yeah, that's pretty much. In other words, if money is holding you back from scaling, that's probably a good fit for you. If you need money to make you successful, then that's a whole other question and that's probably something that they don't want to get involved in.

Robert Plank: Okay. Fair enough. This whole Shark Tank thing, I guess that's one avenue. Then I guess another avenue, like you said, is someone can go on Amazon, someone can get a supplier and private label or re-engineer something and then put it on Amazon. Is there any other kind of avenue someone should be taking if they have a product or they're making a product and they're looking to sell it?

Filip Valica: Yeah, absolutely. The standard model is manufacturing it yourself or outsourcing the manufacturer and you're basically wrapping a business around it, where you're fulfilling it yourself, you're handling the customer service or, again, you're outsourcing it, depending on your skillset. That's the base model. Many of the people that I have on the show have gone that route. They've got one to five employees small businesses where they've been in business for three to five years or whatever. They go to the trade shows. They do the online marketing and they do the fulfillment through their website, and they ship wholesale as well as retail. I guess that's the bread and butter. That's what people assume is the normal path. I would say the Amazon private labeling or the Amazon fulfillment path is maybe a fringe. Then there's also licensing, where you don't want to deal with any of that. All you want to do is say, "Here's my idea. Who's going to give me a percent of the revenue for it?"

Robert Plank: That seems kind of cool. Tell us about that a little bit.

Filip Valica: Yeah, so I'm not going to get myself into trouble by getting into too much detail because I'm an engineer and I am not a licensing lawyer or attorney and I haven't been involved in a lot of these cases, but basically that involves taking your intellectual property to a company that's highly likely to make your product and make it real, that has these connections in retail and the supply chain that you're looking for. For example, if you have a special tool that helps somebody around the house to do a DIY project, you'd go into a Home Depot or a Lou's and look at other tools that are similar to yours, find the manufacturer of those tools and then contact those manufacturers to say, "Hey, look. I've got this great idea that you need to start making and here's the cell sheet" which is basically a sheet that has a concept of the idea and all the benefits for the consumer and any detail that you can offer, and hope that they bite.

Now the strength of your deal is determined by a lot of factors, including the market it's in, the industry, how much upfront work you've done, do you already have an audience for it or you're just putting something up in the air, that type of thing. It could be anywhere from 3% to 10% of the revenue.

Robert Plank: Okay. What's cool about everything I've been hearing today is that there are a lot more options that I've been previously thought as far as, like you said, even just the licensing part of it or the combining different things together to make your Amazon product or selling it on their own website. It seems like no one's really locked into just one single avenue to take with all this.

Filip Valica: Yeah. I'm heavily biased, right? I'm really hands-on. I love doing DIY stuff. That's why it's DIY product development. I just get in there. I roll up my sleeves, then I do it because I enjoy it. I understand that doesn't fit everybody, but the nice thing is, especially now in today's world, where you have all these technologies that enable to do all these things, funding is one step on that model. Crowdfunding hasn't been as big as it is today in forever. Crowdfunding is based on like a 1800s model where people got together when there weren't as many taxes and they built things that the community needed. There have been other advances in like prototyping and all sorts of other things to enable you to do things by yourself that we didn't have 10, 15 years ago. Ecommerce is just blown up in the last five or 10 years, not in terms of the market share only compared to retail, but I mean in terms of the tools that are available to you and me to be able to sell something without any experience.

Robert Plank: Oh, yeah. I agree. With all that stuff, all the tools and all the platforms and all of those things available to everyone, what's the big mistake you see everyone making everywhere still?

Filip Valica: Oh, gosh. Big mistake is that you never validate your market and your consumer. You skip a step and you go off into the design phase where you're starting to spend money or you go on to protecting your IP, like getting a patent. Now don't get me wrong. I'm not a lawyer, I'm not giving a legal advice, asterisk. There is something called a provisional patent, so you don't have to spend a whole tons of the money. It's a provisional patent application that you fill out that gives you a year to put patent pending on your idea so you can develop it. Don't spend a ton of money upfront, bottom line, to validate your idea before it has legs. The worst case you can get into is that now you owe all this money to manufacturers, to people that are creating your prototypes and there's nobody that wants to buy your baby, and you get so invested because you've rushed through all these steps before validating, that now it has to work and you get really desperate. It's tough to make decisions that are logical at that point.

Robert Plank: Oh, no, because you're just in a panic mode at that point. Do you think that's because maybe it's like a ego kind of thing? Maybe someone says, "My product has just got to work so I'm just going to go forward with that"?

Filip Valica: Gosh. There's so many things. People that are their own customers can get blinders. You know, if you develop something for yourself, which is by the way a really good way to get ideas, is if you see that there's a need for it, because you need it in your own life; chances are someone else might need it too. Those types of people usually make the mistake of not validating that or not getting other input, but it could be as [inaudible 00:22:24]. There's so many ideas that you could run with that you just picked one without bringing any data into it. It's not a more ego thing. You just haven't done the steps or the work.

Robert Plank: Okay. Fair enough. It's like if people want to have a business, then if it makes sense if they had logical business steps as opposed to just winging it, I guess.

Filip Valica: Well, because it's just so hard to make a decision if there's no roadmap or a game plan for you, that it's easy to skip a step because it's not fun. It's not fun to go out there and talk to people who'll tell you no, that your idea stinks. It's not fun to go research. One of the early steps is to validate your market. That's when you see you need, for example, do you need any type of certification or testing for your product? How big is the market? People sometimes skip that step and then six steps later you realize you need FDA approval and it's 25 grand and takes a year or two. That's a tough pill.

Robert Plank: Yeah, scary stuff.

Filip Valica: It's not the fun part though, because the fun part is making the prototype or it's contacting manufacturers or creating the logo or whatever you deem to be really fun, and so you skip some of the other steps because, "Whatever, I'll get back to it" and in reality, you're just compounding the problem because now you're just getting more invested into the idea. It becomes really hard to say no to it later.

Robert Plank: Right. Yeah. It seems like that's a pretty easy trap to fall into if they don't have the right advice and the right guidance and stuff. Could you tell us about your website and your podcast and about all that kind of stuff?

Filip Valica: Yeah. I really appreciate you having me on. I'm definitely not going to be one of those people that says, "Oh, well, if you don't follow my plan, you're doomed." There's so many ways of going about going to market. I present one way. It's worked for me. It's worked for the companies that I've worked. I have a certain type of, again, hands-on, just get into it. That may not be you. If you go on TheProductStartup.com, you can find a step by step blueprint that you can follow to help turn your ideas into physical products. I also have a podcast where I interview other successful people that have done this. You don't have to take my word for it as an engineer. There's people that haven't had that experience that have put 5,000 dollars in and they have physical product based businesses that you can just listen to them and learn and see what they did.

Robert Plank: Awesome. Sounds like lots of good advice and lots of good stories there at the TheProductStartup.com. Thanks so much, Filip, for stopping by the show and telling us all about making a product.[/showhide]

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095: Tim Jensen Explains Amazon Retail Arbitrage

Today's Sponsor: Dropship CEO Amazon Selling Course
(Feedback Patrol tool included)

Tim Jensen is one of our favorite Dropship CEO students. He and his wife in Onalaska, Wisconsin sell $1,000 of inventory through Amazon from retail arbitrage (scanning in items at discount stores and mailing them in) with no employees, from their living room and one-stall garage:

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"Amazon Retail Arbitrage" FREE Report

Part 1: Big Picture (long term with Amazon)

• invest in inventory
• scale: invest the profits that come back in
• inventory turnover: sell frequently (30-90 days after purchase, or dump what's not selling)
• outsource some tasks: receipts, taxes, payroll

Part 2: Flexibility

• sell evergreen items
• Use CamelCamelCamel.com to see if Amazon is selling the item you want to sell (so you can avoid it)

Part 3: Pay Attention to Detail

• make sure your UPC code matches the listing
• follow the rules, there is no flying under the radar
• supply and demand: people pay higher prices for convenience

Terms Tim Uses

• inventory: the items you're selling
• supplies: tape, boxes, etc.
• sourcing: where your items are coming from
• UPC: barcode
• SKU: stock keeping unit
• FBA: Fulfilled By Amazon
• MF: Merchant Fulfilled
• prep: bubble wrap, packing, labeling, etc.
• RA: retail arbitrage
• OA: online arbitrage
• wholesale: purchase items in bulk
• PL: private label (your own brand name)

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